Your biweekly update on edible oils & fats by Aveno.

Waiting for inspiration.

The global demand for edible oils and fats continues to increase annually. The past two years by approximately 4% due to, among other things, rising populations and larger biodiesel mandates. This season it is assumed that global consumption of edible vegetable oils will increase by only about 1%, but that consumption will also exceed production by approximately 1Mmt.

As a result, prices remain supported, also aided by the reduced past harvests of rapeseed and sunflower seeds amidst a rising global demand for rape en sun oil. In recent weeks markets generally also firmed because palm oil production is lagging behind, resulting in higher prices and less exports.

With an uncertain future, market conditions can change quickly, especially in light of the ongoing tariff discussions. Currently, the US has postponed the imposition of tariffs on Canada and Mexico and positive discussions appear to be ongoing with China. Also, uncertainties surrounding the policy-driven demand for biodiesel (in the US, Indonesia, Canada, Brazil...) continue to affect the market.

Weak Asean demand, weak petroleum prices and this season’s big soybean harvests have kept prices in check and so most buyers remained uninspired, not really knowing what to expect next, as they await more clarity.

The eurozone economy is still stagnating or even contracting, although the pace of decline is slowing. Services continued to grow a bit but downbeat consumers keep household spending low amid global uncertainty, also crippling services. With falling factory orders, companies signaling cost cuts and layoffs, potential tariff disruptions and geopolitical troubles, the economic outlook remains unsure.

While the European Central Bank pretends inflation is under control, costs (passed on to consumers) continue to rise for businesses. And with current weak demand, the ECB is expected to continue cutting key interest rates. The average American consumer is also suffering from high interest rates and inflation. The Federal Reserve may also lower interest rates and “print money” to stimulate the economy.

While some believe that both economic growth and inflation will slow in the first half of 2025, others fear a tsunami of newly printed money that will only lead to more money devaluation, as more money chasing the same amount of goods equals inflation. Stagflation cannot be ruled out.

BioFuels

Active market participants have told Aveno: “… a dark cloud is gathering here. We should be a little more cautious about further growth in biofuels from the second half of this year. Support for the idea is clearly declining...”

Brazil's National Energy Policy Council recently decided to freeze the mandatory biodiesel quantity in diesel fuel at 14% instead of increasing it to 15% in March as planned. The government wants to counter high food prices on concerns about inflation and purchasing power of consumers. The biodiesel incorporation rate, which can be revised and adapted at any time, is supposed to increase yearly to eventually reach 25%. The majority of Brazil’s biodiesel is made from locally produced soybean oil (abt. 6Mmt in 2024).

Indonesia has been struggling with the implementation of its B40 program and the POGO (palm oil – gas oil) spread remains quite big, making it a costly exercise. We’ll see if everything gets on track March onwards.

In the US uncertainty about the federal support for biodiesel is expected to last till the summer. Meanwhile biomass-based diesel production dropped by abt. 20% and imports stopped. It won’t completely disappear as there are also separate state support mechanisms and obligations in place but change is on its way and no one wants to get caught with his fingers between the door. And as there are no mandates for SAF (sustainable aviation fuel) this might even never get off the ground.

During a meeting of the International Maritime Organization (IMO), on measures to achieve a net-zero global shipping industry by 2050, NGOs and shipping companies called on IMO to discourage the use of crop-based biofuels in shipping and exclude them from compliance with existing regulatory requirements, as relying on biofuels may create more problems than they solve in terms of addressing the industry's climate impact. A study conducted on behalf of T&E revealed that palm and soybean oil could potentially make up two-thirds of the biodiesel used in shipping by 2030, as they are the most cost-effective options. In light of this, Europe has already excluded them from its marine fuels regulations.

Palm Oil

The palm market is characterized by low production and low stocks in both exporting and importing countries. Palm oil futures have risen on lower production in Malaysia, weighing on overall stock levels in the country. Heavy rainfall in key production areas and the return home of many plantation workers for Ramadan (March 1-29) are having a major negative impact on February and March production. High prices pushed buyers towards alternatives such as soybean oil. Last Friday May ’25 palm oil futures closed at MYR 4664/mt.

Palm oil prices were also inspired by optimism over higher biodiesel blending in Indonesia, the world's largest palm oil producer. Indonesia began increasing biodiesel blending in fossil diesel from 35% to 40% in January but struggled with its implementation. The Energy Ministry now expects the program, known as B40, to be fully operational in March. Increased palm oil use for biodiesel in Indonesia means less palm oil for export.